A review of Toll Brothers' 4Q14 earnings (Part 2 of 5)
Toll Brothers’ revenues increased in Q4
Toll Brothers (TOL) reported fourth-quarter revenues of $1.35 billion, which matched the forecast of Wall Street analysts. This was an increase of 29% from the same quarter last year.
While these numbers were positive on a year-over-year comparison, we’re starting to see the effects of increasing home prices on housing demand, although the luxury end seems to be doing better than everything else.
The outlook spooks Wall Street
While Toll Brothers reported numbers that matched Wall Street on revenues but missed on earnings per share, it also reported that contract signings were up 16% in dollar terms and up 10% in unit terms. This made investors worry that the growth trajectory of the builder is waning. This is because prices have been rising very rapidly, especially at the high end of the market.
The company’s average selling price of a net signed contract was $757,000 versus $721,000 a year ago. This is only a 5% increase in price, which is a sign that prices have been pushed up about as far as they can go.
Toll Brothers isn’t the only builder that’s seeing a deceleration in orders on a unit basis. Virtually every builder, from Lennar Corporation (LEN) and D.R. Horton (DHI) to PulteGroup (PHM) and Standard Pacific (SPF), noted that buyers are starting to balk at high prices and high interest rates.
Deliveries and backlog
Deliveries in 4Q14 rose 59% in dollar terms and 22% in units. Backlog, which is an indication of future revenues, increased 3% in dollars and was flat in units.
At the end of the quarter, Toll Brothers had approximately 47,200 lots owned and optioned, compared to 49,000 at the end of the second quarter and 48,600 the year before.
The company finished the quarter with 263 selling communities compared to 256 last quarter and 232 the year before.
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